Plunging oil price and cyber attacks are the two big risks to global security
according to security consultancy Control Risks

The plunging oil price and its impact on Russia’s economy has taken the world by surprise but how crude’s decline will affect China is the real risk to global stability, according to a leading security consultancy.

Richard Fenning, chief executive of Control Risks, has warned that while Russia is making headlines, how China’s economy adjusts to slower growth is a bigger danger.

Speaking as the company published its annual Risk Map report looking into the coming year, Mr Fenning said: “It has been a target-rich environment for risk this year but oil has been the crunch issue, bigger than the threat posed by the Islamic State.

“The untold and more precarious risk is China’s growth. The country has seen a decade of growth of 10pc to 12pc and now it’s going to have to adjust to 6.5pc to 7pc in the future. How its political leaders in Beijing manage that is crucial.”

He said the “dramatic idea” of OPEC ministers and Saudi Arabia in particular conspiring to execute political policy by maintaining production to cripple Iran, punish Russia and harm the US shale industry is wrong.

“I have a very strong sense that China is the hidden factor,” Mr Fenning said, pointing out that cheaper energy prices would help Beijing manage its economic growth as it becomes increasingly dependent on domestic consumption. A smooth transition would reduce the risks of ecomonic shocks that would be felt around the world.

The hacking attack on Sony highlights how cyber will continue to be a growing hazard for industry, according to Mr Fenning.

“There are two types of companies, those that have been hacked and those that don’t yet know they have been hacked,” he said. “In the future companies will be judged not on whether they have been hacked but how they responded to the attack.”

Film The Interview is believed to hve triggered the hacking attack on Sony

The Sony attack – widely attributed to be the work of North Korea in retaliation over a film The Interview about an assasination attempt on Kim Jong-un – takes “cyber attacks to a state level”, Mr Fenning said.

“The threat of attacks on people if they go to see the film in cinemas takes the threat back to good, old-fashioned violence,” he said. “Sony’s lawyers had to pull it.”

The economics of cyber warfare means they will become more prevalent. “It is the cheapest form of war since the bow and arrow,” said Mr Fenning. “Every medium sized country is developing their cyber warfare capability and everyone is doing it to everyone else. The idea that it’s just China [and a few other nations] country is wrong.”

Control Risks also highlights power “being lost in the ether” and moving away from politicians as a hazard for business. In the UK this manifests as political instability.

“For the first time I’ve had potential investors asking me about political risk in the UK. These are companies from Japan, Brazil, Malaysia and they are concerned about the break up of the union and the UK’s EU membership.”

This power shift does not mean the world is controlled by “a few oil companies and Microsoft”, he said, but much more attention has to be paid to “non-state actors”, for example the Islamic State.

He also forecasts banks and financial institutions being increasingly ready to relocate to find less onerous regulation, pointing to the $80bn of penalties imposed on them in the year to September 2014. He added that “if these fines were equivalent to GDP, they would be the world’s 63rd largest economy”.